NOK volatile on 2004, Q1 outlook

Lucent takes a few knocks, KRI upgraded, EK job cuts

By

EmilyChurch

LONDON (CBS.MW) - U.S. tech stocks were heading toward a mixed start on Thursday after Nokia guided for rising first quarter sales, but shares of AT&T and flash memory card maker Sandisk came under selling pressure.

Economic data was market-friendly, but did little to move the stock futures. The seasonally adjusted weekly average for initial jobless claims sank by 3,250 in the four weeks ending Jan. 17 to a three-year low of 344,500. It's the lowest level of initial claims for state unemployment benefits since the first week of President Bush's administration.

Trading in Nokia
NOK, -1.55%
was volatile after the leading mobile phone maker's outlook for the phone and networking systems industries leaned toward the cautious, offsetting its own view for rising sales this quarter.

Elsewhere, Dow industrials member Eastman Kodak
EK
said Thursday it expects to cut its worldwide workforce by about 20 percent, or by 12,000 to 15,000 jobs, over the next three years.

Kodak's plans include shuttering some manufacturing sites and reducing operations in some of its traditional businesses. The Rochester, N.Y company expects to cut total facility square footage by about one-third.

Nokia said it expects sales in the first quarter to rise 3 percent to 7 percent over the year-ago quarter. It added it continues to expect that mobile device market volumes will grow somewhat over 10 percent in 2004. It sees the network infrastructure market "at the same level as 2003 or slightly up, in euro terms for the year, an upgrade to its earlier projection. See more

At last glance, the New York-listed Nokia shares were up 15 cents at $21.12. The Nasdaq 100s
QQQ, -3.25%
were up 0.4 percent, against the trend for many of the tech stocks actually seeing some trade in the speculative session. Bellwethers Microsoft
MSFT, -3.39%
and Intel Corp.
MSFT, -3.39%
were seeing small gains, however.

Network outlook

In the networking sector, dealers said shares of Lucent Technologies
LU
were marked at $4.35 in London, down from a $4.42 close amid some cautious broker commentary.

"Although we believe industry fundamentals are improving and Lucent should benefit from a better capital expenditure environment, particularly in wireless, the company still needs to improve its position in wireline," UBS said.

Also, make of phone-network gear Tellabs
TLAB
shares declined 2.5 percent to $10.25. It reported a fourth-quarter net loss of $23 million, or 6 cents a share, vs. a loss of 21 cents a share in the year-earlier period. Net sales fell 11 percent to $279.3 million, due primarily to "sharply lower" orders for its cable telephony products, and declines in sales of optical networking products, but exceeded analyst forecasts of $261.6 million.

In Europe, networking-related stocks Alcatel
ALA, +0.32%
and Ericsson
ERICY
were flat to lower. The networking stocks had a huge rally in recent days, but ended mainly lower on Wednesday.

Nortel
NT
shares were lower on the ECNs, but other networking stocks were mixed. Mobile operator AT&T Wireless
AWE, +8.33%
was up 0.8 percent to $10.90 as it confirmed recent deal interest in the company.

Focus stocks

AT&T
T, +0.20%
shares were down 3.5 percent to $20.51 after it reported a larger-than-expected decline in fourth quarter sales, down 12.8 percent to $8.1 billion from $9.29 billion a year earlier.

Pfizer
PFE, +1.54%
earnings topped the forecast. Revenue rose 52 percent to $14.17 billion, topping analyst expectations of $13.64 billion. Looking ahead, the company said it was "comfortable" with its 2004 targets for earnings of $2.13 a share and revenue of $54 billion, vs. current analyst projections of $2.10 and $52.05 billion, respectively. Shares rose 2.4 percent to $36.50.

EBay
EBAY, -0.57%
gained $2.50, or 3.9 percent, to trade at $66.88 after the close after the Internet auctioneer's December quarter earnings topped the average estimate. It said 2004 revenue will near $3 billion, above the $2.9 billion consensus estimate. The stock was marked at $67.25 in London.

EBay's "management raised guidance as expected. All in, a great quarter, but we think this was anticipated in the stockm" said Merrill Lynch. The broker raised its 2004 revenue estimate to $3.04 billion from $2.94 billion and increased its earnings per share to $1.07 from an earlier projection at $1.02. It sees 2005 sales at $4 billion and EPS at $1.43.

"Gross margins are likely to trend down through the year because while prices decline, SanDisk's costs remain fixed until the 90nm transition," as well as Samsung issues, J.P. Morgan Securities said. "In our view, margins should rebound once the company makes the transition to 90 nm."

In software, Germany's SAP
SAP, -2.89%
said that 2004 software sales should rise 10 percent, giving a boost to the company that earlier in the month had flagged declining fourth quarter sales.

Elsewhere in software, Siebel Systems
SEBL
was down 2.5 percent at $15.07 on the ECNs and BEA Systems
BEAS
was down 2.5 percent at $13.33.

Broker calls

UBS raised its earnings forecast on PC-printer maker Hewlett-Packard
HPQ, -2.52%
to $1.45 a share in fiscal 2004 from an earlier projection at $1.42, "based on our view that fundamentals can continue to improve in HP's Enterprise Systems (ESG) and other key segments. The broker raised its price target on the stock to $31 from $27.

Dresdner Kleinwort raised its rating on Xilinx
XLNX, -2.89%
to buy from hold on expectations for improving industry demand. "The improving economy and increasing telecom capital spending will in our opinion continue to drive demand."

Banc of America Securities downgraded its rating on media stock Knight Ridder
KRI, -2.65%
to neutral from buy. "At current levels, we think the stock has already priced in a significant portion of the expected recovery in the help wanted category, as well as the overall improving ad environment. Moreover, the dept. store and auto categories will likely create a drag on revenue growth this year," the broker said.

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